Devalued Argentine peso seen spurring grain exports

Buenos Aires | Reuters — The currency devaluation set to kick off in Argentina on Thursday is expected to pump millions of tonnes of pent-up grains supply into the international market at a time when the world is already seeing record stockpiles.

For the first time since 2011, Argentines have full access to U.S. dollars after the new government allowed the exchange rate to float. The policy shift prompted a more than 26.5 per cent devaluation of the peso that will make exporting more profitable for farmers, who get paid in the newly muscular dollar.

President Mauricio Macri was inaugurated last week promising to revitalize the Pampas farm belt with free market policies. His grains production push is happening as global stocks of corn, soybeans and wheat are already projected by the U.S. Department of Agriculture to be the highest ever this season.

The central bank is scrambling for the reserves it will need to keep up with dollar demand. To help, the government has sealed a deal with grains exporters to liquidate $400 million of produce per day over the next few weeks (all figures US$).

“There is strong demand for grains in the Middle East and Asia. So $400 million in sales per day is realistic, considering the huge stockpiles that Argentina farmers have,” said Leandro Pierbattisti, an analyst with the country’s grains warehousing industry chamber.

He said Argentina liquidated only $35 million per day on average in November. “There will be an important increase in exports over the months ahead, especially in corn, wheat and soybeans,” Pierbattisti said.

Growers were sitting on close to 13 million tonnes of soybeans, waiting for the devaluation, said Ernesto Ambrosetti, chief economist at the SRA (Argentine Rural Society), which represents the country’s biggest farms.

“We expect those 13 million tonnes to be sold between now and the next harvest in April and May,” Ambrosetti said.

The new wheat and corn policies are expected to induce wider planting next year, increasing crop rotation after years of over planting soybeans.

This season’s corn is nearly all planted. Wheat goes into the ground in May-July. Argentina has exported about 4.5 million tonnes of 2015-16 wheat. That figure is expected by local analysts to zoom to 7.4 million tonnes next season.

Argentina, the world’s No. 3 soybean exporter and top supplier of soymeal feed, is also out to reclaim its place as a top supplier of beef under Macri. He has eliminated the 15 per cent tax that had been put on beef exports.

The government estimates the country’s grains production will grow to 130 million tonnes per year during Macri’s first term, ending in 2019, up from the current 100 million tonnes.

— Hugh Bronsteinreports for Reuters from Buenos Aires. Additional reporting for Reuters by Gabriel Burin in Buenos Aires and Karl Plume in Chicago.